Liberty Oilfield Services has five hydraulic fracturing fleets operating in the Bakken, and 23 fleets companywide. It expects that it will be able to keep all of those fleets running through the end of the year, despite softening demand as the year winds down.
That’s true in the Bakken, as well as the other plays where Liberty is active, including the Permian.
“Based on visibility into our customers’ activity pipeline for the year, we believe demand for liberty fleets will remain high through the third quarter,” CEO Chris Wright said in the company’s second quarter earnings call on Wednesday. “And we are working closely with our customers to mitigate the effect of operating budget exhaustion toward the end of the year.”
Capital markets have by and large tied up their purse strings when it comes to the oil and gas industry. Companies in general are managing their activities to stay within announced budgets in a new atmosphere of capital discipline.
“There continues to be an oversupply of (Hydraulic fracturing) fleets in the market,” Wright said. “That is holding down pricing.”
He doesn’t see that getting better until that supply dwindles to balance with demand.
“In the (hydraulic fracturing) market we have a meaningful number of frac spreads that, without significant upgrade expenditures, are nearing the end of their useful lives,” he added. “Plus, as we have heard from competitors, there are a large number of frac spreads that are not earning a reasonable financial return.”
The hydraulic fracturing market is not the only oil and gas sector struggling with oversupply, Wright added. The technology and efficiency gains in well construction and productivity have created oversupply of the commodity as well.
“Both of these are manifest today as operators reduce capital budgets to align with cash flow,” Wright said. “We will see a slowing of the growth rate of U.S. oil and natural gas production.”
These trends are going to flatten capital expenditures for oil and gas. That will eventually tighten up markets for both commodities and hydraulic fracturing.
“While the current oversupply is painful for all in and around the industry, these times will pass,” Wright said.
Despite the changing market, Liberty did just accept delivery of a new Tier Four quiet frac fleet at the end of the second quarter. It won’t be deployed until the time is right.
“It is quite possible this fleet may not be commissioned into service until 2020, when we are seeing significant customer demand,” Wright said.
In the Bakken, meanwhile, the company did deploy its fifth fleet this year in April, called Viking. The new fleet showcases quiet fleet technology, which the company has been using in Colorado for about a year and one-half now.
According to the company’s website, quiet fleets are about the same noise level as speech in a large business office at 500 feet away, and are just above the noise level of quiet urban nighttime sounds.
Quiet frac fleets are just one of several innovations that Liberty has either brought to the Bakken already, or is working on bringing soon.
Wright also mentioned containerized movement of sand to reduce both dust and noise, and advanced truck management solutions, to reduce community impact.
Sand boxes were deployed by Liberty in the Bakken about two years ago.
“We partner with clients in the most challenging urban interfaces where environmental, social, and governmental concerns are paramount in enabling the development of assets,” Wright said. “We are committed to deep engagement with our community and customers, because their success is what drives us.”
Liberty will continue to focus on technological innovations in both hydraulic fracturing design and operational execution. These efforts includes a larger effort to study parent child well relationships using the company’s proprietary database and multi-varied analytical techniques.
Wright said the company is excited about the opportunities ahead, but said that the shale revolution needs to be recognized for the benefits it has brought around the globe.
“One-third of humanity still cooks like our ancestors did, burning wood, dung, or coal indoors in open stoves,” he said.
It is a practice that kills 4 million people annually around the globe, and causes poor pulmonary health for many others exposed to it.
“By far the most common replacement for cooking fuel is LPG, liquid petroleum gas, followed by natural gas. Tens of millions of folks are switching to these clean modern cooking fuels every year and it is saving countless lives,” Wright said. “It is safe to say that the shale revolution has saved millions of lives.”